“In my whole life,” Charlie Munger says, “I have known no wise people who didn't read all the time. None, zero.”
As a self-made billionaire, Charlie Munger should know. He’s the partner of none other than Warren Buffett, considered the greatest investor ever.
Unfortunately, any idiot can write a book. Ha, or a newspaper column, apparently.
In the time I’ve been writing this column, I’ve written about one book at a time, so it’s time for a change-up. Here I cover off several excellent financial books.
One best-selling author in 1998 made a compelling case for the Dow Jones Industrial Average reaching 40,000 by 2010. Baby boomers were going to drive the markets to staggering heights and all we had to do is invest and wait for the trend to make us rich.
Well, it’s 2013 and as I’m writing this the Dow is around 15,000, about as far from the predicted 40,000 level as I am from scoring a Stanley Cup winning goal.
The guy just keeps updating his book. When it’s clear that his predictions are horribly wrong he just writes a new version. I’ve always said that people with such fabulous market insight would make a lot more money investing than selling books, but I’m sure he’s doing very well on the book tour.
Unfortunately, many people place great stock in these books, also the insights of some newspaper writer. It astounds me that folks will take the money advice of some pimply-faced reporter making $50,000 and living in his parents’ basement.
Two tomes that are good basic resources for the beginner to the advanced beginner are The Wealthy Barber by David Chilton and, one of my favourites, The Money Coach by Riley Moynes. Barber is for people who don’t really want to read financial books. It’s as entertaining as it is educational. It’s the spoonful of sugar that helps the medicine go down.
The Money Coach is great. All of the basics are here. If you want RRSP advice, it’s there. Want to know what kind of insurance to buy and what to avoid, that too. It won’t make you a sophisticated investor but it will make you a far better money manager.
If you want insight into what makes people wealthy, The Millionaire Next Door by Thomas Stanley and William Danko is a must-read. Stanley and Danko interviewed millionaires to learn that most aren’t what you might expect (doctors, lawyers or executives). They didn’t inherit their wealth but are ordinary folks – teachers, plumbers and government workers – who make good financial decisions. They aren’t seduced by the lure of flashy lifestyles, but became prodigious accumulators of wealth by living within their means and diligently investing. The simple message: Being a millionaire can be within your grasp, if you do the right things.
One Up on Wall Street by Peter Lynch is a how-to guide for one of the brightest investment minds ever. A renowned mutual fund manager, Lynch has crammed this book full of practical investment wisdom.
The Richest Man in Babylon by George S. Clason is a classic. Clason uses parables to provide money lessons. You have to love a great financial book that you can carry in your pocket.
Years ago I bought copies of Kevin Cork’s The Money Book to give to younger clients. It’s written for the under-35 crowd, but the advice applies to all of us. Kevin is an associate of mine and years ago my wife was with a friend in a book store. The friend had been browsing through Kevin’s book and was laughing aloud at Kevin’s outrageous, humourous style. If you have adult children, give them each a copy. Kevin will appreciate it, and so will your children.
No book list is complete without a mention of Warren Buffett. There are many good investment books written by or about Buffett. Some of the best Buffett material is taken from his Berkshire Hathaway annual reports, where his letters to shareholders contain priceless advice and insight. They’re available on the Berkshire Hathaway website.
Finally, Benjamin Graham’s The Intelligent Investor may be the best book on investing ever written. This is no easy read, but it’s worth your time if you’re so inclined.
As a student of investing, I personally own 60 financial books on various topics. I lend them to clients who are interested. Most aren’t, preferring an advisor they can trust. It’s individual preference.
Read ‘em and reap.